Today's Opportunities - January 1, 2008

We’re quite pleased with the recent performance of most of the funds on our opportunities list.  For the most part, they far exceeded the U.S. stock market’s 5.14% increase in 2007 and continue to be adding value relative to their respective benchmarks.

For all the market volatility during the fourth quarter, the impact on the relative attractiveness of most funds we track was quite minimal.  Those that had been doing well going into Q4, continued to do so. We are removing only three funds this quarter, and adding three more.

Changes in Fund Recommendations

Deletions

Janus Overseas (JAOSX) – fund closed to new investors during the fourth quarter.  We still find it quite attractive and will continue to hold in our managed accounts. We recommend individual investors do the same.  What many may not realize is that this is not a traditional large-cap overseas fund.  Instead, the Janus fund has generated quite a bit of recent excess performance through its exposure to emerging markets.

Forward International Equity (FFINX) – fund is just not performing well enough on a risk-adjusted basis for us to continue recommending it.  In all likelihood performance has been negatively impacted by the fund’s significant weighting in financial service stocks – a sector that’s come under intense pressure over the last few quarter and is likely to face difficulties going forward.  Time to move on.

SSgA Emerging Markets (SSEMX) – due to the fund’s recent becoming closed to new investors, we need to SSgA Emerging Markets from our opportunities list. SSgA’s offering has put up a marginally better record than most competitors in the sector, yet we’d continue advising investors to consider our primary recommendation in the sector, Quant Emerging Markets (QFFOX) which has slightly greater exposure to the Asian markets – a region we continue to find attractive.

Additions

Artisan International (ARTIX) – While we’d like to find a more compelling opportunity in this space, Artisan International has a long-term record of moderately out-performing the large cap international sector and with growth now strongly preferred by investors should have the wind at its back for awhile now.

Harbor International Value – Inv. (HIINX)  – Unlike Artisan, Harbor International has relatively large positions within the natural resource and industrial materials sectors, areas we continue to find attractive late into the stock market cycle due to supply/demand imbalances which remain.  Like Artisan, Harbor has had long-term success in modestly out-performing the broad international markets.  It’s a solid long-term holding in our opinion.

T. Rowe Price Africa & Middle East (TRAMX) – to start off, this fund is new, likely prone to incredible volatility and definitely not for all investors.  The regions in which it invests are growing rapidly but are the center of geo-political turmoil and notable human rights tragedies – neither of which caring human-beings are insensitive to.  So, there are a lot of issues investors need to deal with before asking the question on whether the fund is right for you.  

If you’re still with us, here are a couple of quick points.  The Africa and Middle East regions are some of the fastest growing in the world and are relatively under-owned by investors.  The fund invests in many of the largest companies in these regions.  T. Rowe Price is a well-respected investment management company, having invested in the emerging markets sector for years.  The fund does have a transaction fee, and a 90-day short-term redemption fee of 2%.  The fund will likely close when they’ve reached a modest amount of assets (say $1-2 billion).

Besides the potential for strong returns, we likely have a real diversifier here – something that isn’t as closely tied or highly correlated to U.S. growth as many other emerging markets.  Give it some thought.